Compensation agreement reaches the lower house

Wednesday, April 9, 2014

Kicillof: YPF valuation is subject to ‘debate’ but a good deal

By Tomás Brockenshire Herald Staff

As the YPF-Repsol compensation payment debate debuted in the Lower House of Congress yesterday, Economy Minister Axel Kicillof stressed that the “value of YPF is infinitely greater than the the price that Repsol will receive.”

Amid continued questions from the opposition about the National Valuation Tribunal’s ruling that set the value for the expropriation close to the US$5 billion stipulated in the Repsol deal, Kicillof recognized that the final number was “a topic of debate.”

Kicillof, speaking to a plenary of the Lower House Budget and Energy Committees to defend the agreement, also added that the valuation of the expropriated shares was a complex and difficult matter, and the debate over the valuation “is never going to be settled.”

The debate, he argued, paled in comparison to the strategic value that a state-run YPF could bring to the economy, adding that in the past the interests of its private owners did not necessarily coincide with the country’s sovereign interests.

Citing the fact that the previous ownership was first and foremost worried about making profits and distributing dividends ahead of reinvestment and production, Kicillof considered that the eventual approval of the compensation would lead to a YPF which is “an engine for the country’s development, the distribution of incomes and equitable growth.”

As opposed to what took place in the Senate, Daniel Martín, president of the NVT, presented an extensive description of how the company’s worth was calculated and explained that it was not based on “ledgers and balance sheets” but on an estimation of the relative worth of the assets that YPF controls directly or indirectly and included contingencies for environmental damage and lawsuits. A version of the presentation explaining the process was to be made available to lawmakers in both committees for further review.

As the settlement was being discussed in the Senate, the Radical Party (UCR) had complained that they had been given a three-page ruling justifying the valuation, which established that YPF as a whole was worth approximately US$9.66 billion.

Roberto Feletti, Victory Front lawmaker and President of the Budget Committee, said that he expects the plenary to issue a positive ruling on the settlement later today. Several opposition blocs, including the Radical Party, have already announced that they will not support the settlement.

Senate re-run

Kicillof was joined, as was the Senate, by the president’s Legal and Technical Secretary Carlos Zannini and YPF CEO Miguel Galuccio. Zannini took the opportunity to defend the deal once again, calling it “fair and reasonable” and highlighted the fact that the means of payment, in the form of bonds issued to Repsol, was greatly preferable to payment in cash.

Miguel Galuccio cited increases in production and investment but reinforced the idea that much more investment was required to develop Argentina’s extensive but hard-to-reach shale oil and gas deposits.

Opposition lawmakers touched on themes that made the Lower House debate seem very similar with what had taken place in the Senate, with the UCR’s Miguel Giubergia leading questions about the nature of the settlement, the valuation of the shares and the environmental damage left behind by the Repsol administration.

The biggest verbal fireworks came from Victory Front lawmaker Juan Cabandié, who took advantage of the speaking order to attempt to discredit PRO lawmaker Federico Sturzenegger’s questions about the financial costs of the settlement and gas and oil by production by highlighting the fact that PRO opposed the expropriation of YPF and accused the party of defending foreign corporate interests.